TaxMasters Ordered to Pay $195 Million by Texas Jury

March 30 (Bloomberg) -- TaxMasters Inc. and its Chief
Executive Officer Patrick Cox were ordered to pay $195 million
by a Texas jury who found the bankrupt tax-resolution business
liable for 110,000 violations of state law.

The verdict includes $113 million in restitution to the
firm’s customers, $81 million in civil penalties and $1 million
in attorneys fees, Texas Attorney General Greg Abbott said in a
statement today. The jury in Travis County found the Houston-based company and Cox liable for violating the state’s Deceptive
Trade Practices Act after an eight-day trial, according to the
statement.

The company, known for its television commercials that
feature Cox, filed for bankruptcy protection March 18 after it
came under fire from multiple states’ attorneys general. The
commercials, which have been satirized on NBC’s “Saturday Night
Live,” duped unsuspecting citizens, according to the attorneys
general.

“Today’s decision marks a significant victory for the
Texans and TaxMasters customers nationwide who sought help from
TaxMasters with their income tax debts and were taken advantage
of in the midst of a national economic downturn,” Abbott said
in the statement.

Advertised Services

The company advertised its services to taxpayers who
received audit, garnishment, tax deficiency or other notices and
misled customers by not disclosing its no-refund policy and by
claiming its employees would start on a case immediately while
in fact customers had to pay in-full before any work was done,
according to Abbott’s statement.

TaxMasters also failed to consult with the Internal Revenue
Service on behalf of customers and failed to appear at audits
and hearings to postpone or stop garnishments and liens,
according to the statement. Abbott’s office received 891
consumer complaints against TaxMasters from 2005 to 2012, he
said.

Johnie Patterson, a lawyer who represents TaxMasters in the
bankruptcy case, didn’t immediately return a call to his office
for comment on the verdict.